Journal Entry for Sales and Purchase of Goods (original) (raw)

Last Updated : 16 Apr, 2026

Goods are the commodities that are purchased and sold in a business on a daily basis. Goods are denoted as 'Purchases A/c' when goods are purchased and 'Sales A/c' when they are sold.

Goods Account is classified into five different accounts for the purpose of passing journal entries:

**A. Purchases Account: When goods are purchased in cash or credit, donated, lost, or withdrawn for personal use, in all these cases, Goods are denoted as Purchases A/c.

**Journal Entry:

  1. Goods purchased for cash
  2. Goods Donated
  3. Goods are withdrawn for personal use
  4. Goods lost by fire

**Example:

  1. Goods purchased in cash ₹25,000.
  2. Goods worth ₹5,000 were given as a donation.
  3. Goods worth ₹1,000 taken away for personal use by proprietor.
  4. Goods lost by fire ₹2,500

**Solution:

**B. Sales Account: When goods are sold, then it is represented as Sales A/c.

**Journal Entry:

**Example:

  1. Goods sold to Nupur on credit worth ₹2,000.
  2. Goods sold to Gaurav for cash ₹5,000.

**Solution:

**C. Purchase Return or Return Outwards Account: When purchased goods are returned to the supplier, it is denoted as Purchase Return A/c or Return Outwards A/c.

**Journal Entry:

**Example: Goods purchased worth ₹2,000 from Shubham were returned.

**Solution:

**D. Sales Return or Return Inwards Account: When goods sold are returned by the customers, it is termed as Sales Return or Return Inwards A/c.

**Journal Entry:

**Example: Goods sold to Nupur were returned worth ₹1,000.

**Solution:

**E. Stock: The leftover unsold goods at the end of a financial year are represented through stock. Closing Stock is the valuation of goods leftover at the end of a financial year, and Opening Stock is the valuation of goods an enterprise has at the beginning of a financial year.

**Journal Entry: